Best business commentary

How bad are things, really?

Things are bad, but some investors “are cherry picking among the carnage,” say Jane Kim and Jeff Opdyke in The Wall Street Journal. What should you do? Well, “compared with Treasurys, stocks are as cheap as they’ve been since the late 1970s,” and many advisers say health care and consumer staples are good “defensive havens” in bad times. Fed rate cuts also weaken the U.S. dollar, which boosts foreign stock returns. But avoid Treasury bonds, where “yields are pathetically low.” And if you’re a saver, you’re facing “stingier rates,” so if you don’t want to jump in the market, at least “lock in yields” as soon as you can.

Things are really bad, and the stock market is probably still “overvalued by 10 percent,” says David Leonhardt in The New York Times. Real estate is even worse, at 30 percent above “historical norms.” We appear to be near the end of a 20-year “huge speculative bubble,” and much of the recent financial turmoil is tied to the fear that our recent “economic successes” will turn out to be “a mirage.” Not everything is bad—non-banking corporate balance sheets “remain remarkably strong” and the weak dollar helps exports—but consumers won’t keep borrowing to spend, and “Wall Street hasn’t yet come clean.” It’s hard not to believe we’re facing one ugly “payback.”

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